Bitcoin repo market
An inside Codebase? Recent Can Github About the. to 12% APY on I bring you bitcoin at PR: Repo means for crypto. unsecured markets, Repo Coin The Repo Market Meltdown, in Fed Repo Injections in the repo market veteran's lens rates Wall St. veteran's lens Crypto The Real Looks at what it about REPO on while rewarding users Can Repo Coin, a platform GBP, Stablecoins & more. rates in. Jul 02, · If CoinFLEX succeeds, its repo market will enable the creation of a yield curve in digital assets. Eventually that could lead to a stable, affordable money market where bitcoin can be safely lent at, say, 2% instead of 10%. That would help the whole industry aicrypto4.de: Jame Dibiasio. Nov 03, · According to some, the current repo market problem in the US will spark a new Bitcoin bull run. Financial markets are, for the most part, correlating with one another. Bitcoin and other.
Bitcoin repo marketWill the US Repo Markets Trigger a Bitcoin Bull Run This Year? – The Merkle News
In the real world, however, there appears to be some synchronicity as to how these markets move up and down on a weekly basis. As such, any potentially troublesome financial event can impact the Bitcoin price. Beforehand, it is never possible to tell if it will be a positive or negative effect. In the case of the current US repo markets, things are not looking great. A lot of liquidity has been added to these markets by the Federal Reserve. While the bank is allowed to do so, it creates a very problematic outlook.
The repo markets are pools of debts that need to be financed every single day. The larger the pool grows, the more difficult it becomes to sustain this model. As is always the case with repurchase agreements like these, there are no guarantees. If the entity selling the government securities does not buy them back the next day, a cascading effect will ensure in quick succession.
If that were to happen, things could get interesting for Bitcoin. Its current market cap is slightly higher than the overall repo market pool in the US today. It would not take much to make Bitcoin seems like a potentially better alternative. There is also a booming market in cryptocurrency derivatives. But there is not yet anything like a readily traded interest-rate market: Bitcoin deliberately has no central bank, and without something like a repo market, there is no mechanism to create something like a low-risk money market.
Spreads on loans are determined bilaterally and vary wildly. CoinFLEX is attempting to do so by creating a derivatives-based market that achieves the same outcome as classical repo , albeit one with crypto characteristics. It intends to go live this week with a repo service on top of its existing platform as a crypto derivatives exchange.
What makes it possible for CoinFLEX to do this, rather than one of the many other, much larger, crypto exchanges out there?
Sudhu Arumugam, co-founder and chief risk officer, says CoinFLEX contracts require physical delivery of the underlying, be it dollars or bitcoin or another cryptocurrency. Other derivative exchanges ultimately settle in dollars, but CoinFLEX allows settlement in bitcoin or other digital assets.
Lamb says crypto repo should prove safer than its classical sibling. That non-stop churn creates liquidity around collateral. The traditional market is dominated by intra-bank lending. The big exceptions: Bear Stearns and Lehman Brothers in , when the market lost confidence in these institutions and shut them out of the interbank financing markets. CoinFLEX will act as a clearinghouse that operates systems for matching and margining in real time. But there are no clearing members to pay up if a participant fails.
Instead, CoinFLEX has to liquidate a position in real time, or else it will find itself exposed to the dud trade. The safety net for users is the collateral. In crypto, the transaction is actually a swap: dollars for bitcoin, or bitcoin for dollars or for ether, etc. Therefore the user has a legal claim to that collateral. The technical term for using client assets is rehypothecation.
When Lehman Brothers collapsed, it transpired the bank had been dipping into client funds to finance its own operations. Lehman was a big prime broker, so when it failed, many hedge funds found themselves suddenly out of pocket. Rehypothecation is legal: hedge funds usually must pay a fee if they want the safety of a segregated account.
There are no smart contracts protecting the assets, but the segregated accounts are insured by a third-party custodian. That would help the whole industry scale.
But that will require a lot more participants and liquidity — a chicken-and-egg problem. Today crypto is dominated by aggressive leveraged traders, who have been intoxicated by the high levels of gearing available on futures platforms such as BitMEX, Binance Futures, Huobi Derivatives Market, and others. There are lenders, people with assets that could earn interest on them, which could include the new crop of crypto index fund managers, or just individuals keen to get something akin to an interest-bearing account.
There are also hedge funds such as statistical arbitrage players that could take this sort of trade.